No deal: Suburbs say can't trust Detroit in water system negotiations

FILE - In a Dec. 12, 2013 file photo, Detroit Emergency Manager Kevyn Orr speaks during an interview with The Associated Press. Detroitís creditors and residents are expected to get their first official glimpse this week of the road out of bankruptcy, even as fights and tinkering continue. Macomb County and other suburban officials are highly skeptical of the plans for the Detroit Water & Sewerage system.
(AP Photo/Paul Sancya, File)

As officials sort through Detroit’s voluminous plan to get out of bankruptcy, the suburbs appear closer to agreement on one key piece of Emergency Manager Kevyn Orr’s blueprint – a 40-year deal to lease the Detroit water system to Wayne, Oakland and Macomb counties for $47 million a year.

A Feb. 11 memo shared among suburban officials outlines in blunt language the many areas where suburban officials do not trust EM Orr’s negotiating team. Portions of the detailed, 11-page memo indicate that Oakland and Macomb leaders fear that they are being scammed.

“I’m a little appalled with the deal that’s on the table. It’s such a bad deal,” said Macomb County Commissioner Jim Carabelli, a Shelby Township Republican. “This … is some scary stuff.”

The document lays out suspicions that the high-powered lawyers handling the negotiations for Orr have withheld or manipulated information about the Department of Water and Sewerage’s legacy costs related to pensions and retiree health care, anticipated expenses for upgrading a neglected network of pipes and pumps, and $113 million worth of past-due water bills, mostly among Detroit customers.

Advertisement

Beyond a brief mention of Detroit’s past political corruption problems, the memo also complains about a “gotcha” approach by Detroit, with EM representatives aggressively pursuing a quick deal under the guise that the suburbs will buy in “at any price” to gain control of the DWSD system.

Instead, the counties have balked at every step of the process as they privately wonder: “Can the city’s representatives be trusted” to strike a fair deal?

By allegedly hiding financial and infrastructure problems, the document said frustrated suburban negotiators are asking “What haven’t the counties found that will result in serious, adverse fiscal and/or programmatic impacts once discovered?”

Bill Nowling, spokesman for Orr, said that the memo that emerged from a 3-hour meeting of suburban officials on Feb. 11 “is dated and the city is hopeful it no longer reflects the counties’ view of the negotiations.” According to Nowling, a new bargaining session held on Tuesday was productive.

“The city took issue with the tone of the memo at the time it was written and believes it did not accurately represent the state of the discussions,” he said.

“… Since discussions began, the city has provided current information and responded to the counties’ questions to the fullest extent possible. It will continue to operate in a forthright and professional manner.”

Detroit presented its long-awaited road map for climbing out of bankruptcy Friday, outlining an elaborate plan to restructure $18 billion in debt, demolish thousands of blighted homes and invest in the broken-down infrastructure that has made the city a worldwide symbol of urban decay.

But the proposal still faces numerous obstacles, and most aspects are still being negotiated in mediation sessions with stakeholders.

The ultimate goal for the water department is the creation of a regional authority that will oversee the system and relieve Detroit of billions of dollars of costs over the next four decades.

One high-ranking Macomb County official said that water service is the “lifeblood” of southeast Michigan and the governor and Legislature should step up and pay most of the costs associated with the proposed DWSD transaction.

“The state of Michigan cannot stand by and let a region that represents 40 percent of the population of the state and 40 percent of the economy of the state deal with an unstable water system,” said Assistant County Executive Melissa Roy.

The memo was written by Oakland County officials affiliated with a study group that has been dissecting the offers and assertions by Detroit. Macomb County Executive Mark Hackel has said he may, in the end, favor privatizing the entire system and putting it in the hands of a contractor.

Overall, Gov. Rick Snyder called the first full bankruptcy plan “a critical step forward.” But it leaves unanswered many questions, including whether creditors and labor unions will accept the deal or fight it, and how long that process might take.

It appears that Detroit’s eagerness to separate the city from the water and sewer department, a massive system with more than 120 suburban municipalities as customers, may still face a rocky road.

“The DWSD,” the memo said, “needs continuing, widespread reform – in financing, in operation and maintenance, in purchasing, in capital improvement, in technology, in personnel and labor optimization, and in service delivery.”